Gotham_ A History of New York City to 1898 - Edwin G. Burrows [491]
Merchants in debt were delighted: though legally obligated to pay their debts in specie, it was now impossible to do so, and this saved them from collapse. Some businesses carried on using notes and checks. Others resorted to barter and promises. Stores, hotels, and oyster cellars issued their own scrip, called shinplasters. “Go to the theater and places of public amusement,” wrote Captain Marryat, “and, instead of change, you receive an I.O.U.”
But the city’s overall economy, tied as it was to international markets, could not so easily finesse the crisis. At the end of May, Hone wrote, “a deadly calm pervades this lately flourishing city. No goods are selling, no business stirring, no boxes encumber the sidewalks of Pearl Street.” Barges and boats lay idle at the docks. “Many of the counting houses were shut up, or advertised to be let,” wrote a British traveler. “The coffee houses were almost empty, the streets near the water side were almost deserted; the grass had begun to grow upon the wharves.”
Panic had given way to depression.
CAUSES AND REMEDIES
What had happened? This was the prime topic of conversation throughout the city. Explanations came in many sizes and shapes, but three predominated: some people blamed the government, some the banks, others the English.
Whig businessmen indicted Andrew Jackson. He had destroyed the Bank of the United States, the financial system’s only regulator, and then, in July 1836, decreed the government would accept only gold or silver as payment for public lands. In requiring hard coin, Jackson had hoped to halt the runaway inflation, and also the monopolization of land by northeastern speculators who had been using borrowed paper money to gobble up millions of midwestern acres. The real consequence, Whigs argued, had been to deepen the monetary crisis, and the Journal of Commerce savaged Jackson for “permitting government to investigate and direct the affairs of private business.”
From Jackson’s perspective, the panic was a necessary corrective—and deserved retribution—for the inflationary expansion generated by bankers and their paper money system. It would pass once all the “speculators and gamblers are broke.” Jack-sonian politician A. Z. Flagg agreed that New York City bankers had blown up “land bubbles and stock bubbles” and now were “reaping the bitter fruits”—an animus strengthened when investigators found that bank officers had filched perhaps $1.5 million from various Manhattan institutions. Jacksonian Senator Silas Wright gave this analysis an anti-Semitic spin when he wrote that the failure of the Joseph brothers—“Jew brokers of New York”—was cause for rejoicing.
Jacksonians and Whigs agreed, however, that the crisis also had international roots. “The barometer of the American money market hangs up at the stock exchange in London,” one Democratic congressman said, and Philip Hone believed that the Bank of England was “arbiter of the fate of the American merchant.”
They were right. Both boom and bust had originated in Europe. British and Continental investors had poured capital into U.S. canals, railroads, and lands, first cautiously, then at a frenzied pace. In addition, Old World creditors let New World merchants import goods on credit. New York City had been America’s link to these money markets. Anglo-American merchant bankers like the Barings and Rothschilds had funneled capital and credit to Hudson River firms like Prime, Ward, and King, and Alexander Brown and Sons, who relayed them to the Continent, stoking the boom. New York wholesalers, and through them country storekeepers, ran up an enormous tab. State governments accumulated huge debts, then borrowed more to pay the interest. Gold and silver imports enabled banks to issue more paper money, facilitating speculation and generating inflation.
In the summer of 1836, what the English had given, the